The Strategist

Bank of England predictably keeps the rate unchanged

06/20/2019 - 17:02

At the end of the June meeting, the Bank of England has not changed the base interest rate, leaving it at 0.75%.

In addition, the bank kept the volume of the program of purchasing government bonds at £435 billion ($ 553.3 billion) and the volume of purchases of corporate bonds at £10 billion.

All decisions of the bank coincided with market expectations and were taken unanimously by all members of the Monetary Policy Committee (MPC).

At the same time, management of the Bank of England noted an increase in risks of a slowdown in the UK economy compared to May due to the deteriorating situation in world trade and increase in the likelihood of the UK leaving the EU without signing an agreement.

"Concerns about world trade have caused volatility in global stock markets, and uncertainty around Brexit resulted in a decline in the pound sterling," – the bank said.

Because of this, the Central Bank lowered its forecast for UK GDP for the second quarter, and now expects no change in the indicator compared to the first quarter, although 0.2% growth was previously forecasted. In the first quarter, the British economy grew by 0.5%.

Inflation in the country in May amounted to 2%, which corresponds to the level targeted by the central bank. However, by the end of the year, the figure is likely to decline amid falling energy prices, the Bank of England said in a statement.

Management of the Central Bank has reaffirmed that direction of further changes in rates will depend on the Brexit process - and the next action of the bank can be either raising or lowering the cost of borrowing.

Pound sterling kept to grow moderately against the dollar and decline against the euro after the announcement of the Bank of England decision.